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FY 2016-17 CAFR Presentation 03-26-18Town of Westlake Council Meeting March 26, 2018 Overview •Introduction •Audit Process •Required Communications •Audit Results •Financial Highlights •New Accounting Pronouncements •Questions 2 3 Introductions 4 The Firm of Texas Weaver is the largest independent accounting firm based in Texas and the Southwest. We’ve served Texas public sector entities for 66 years. REGIONAL AND NATIONAL RANKINGS Largest Firm based in the Southwest Region of the U.S. | Accounting Today (2016) #4 National Leaders in Tax (firms under $100M)| Accounting Today (2016) Top 40 Firms | INSIDE Public Accounting (2015) Top 40 Firms | Accounting Today (2017) 2015 BEST of the BEST Firm to Watch | INSIDE Public Accounting #9 Largest Houston-Area Accounting Firms: Global Revenue | Houston Business Journal (2017) #10 Largest North Texas Accounting Firms | Dallas Business Journal (2017) #4 Largest Tarrant County Accounting Firms | Fort Worth Business Press (2016) #10 Largest San Antonio Accounting Firms | San Antonio Business Journal (2017) Best and Brightest Companies to Work For®| Dallas/Fort Worth (2016) and Houston (2015) 5 Engagement Leadership John DeBurro Partner, Assurance Services Jerry Gaither Partner, Assurance Services 6 Engagement Team Town of Westlake Ben Cohen Manager Jacqueline Diaz Senior Associate I Tom Winson, CPA Advisory Services -ACL Data Specialist Consulting John DeBurro, CPA Partner Audit 7 Audit Process Engagement Timeline 8 Initial Audit Planning Interim Fieldwork Aug 21 –Aug 25 Final Fieldwork Jan 22 –Feb 9 Release Audit Opinion March 23 Council Meeting March 26 Discuss Developments/ Issues Continuous Communication Audit Process •The audit was performed in accordance with Generally Accepted Auditing Standards (GAAS) and Generally Accepted Government Auditing Standards (GAGAS) •The audit process was a risk-based approach in which we identified potential areas of risk that could lead to material misstatement of the financial statements. We tailored our audit programs and resources to specifically address the following areas of risk: •Revenue recognition and related receivables •Capital projects, purchasing and compliance with bidding procedures •Payables, accrued liabilities, and expenditures 9 Audit Process •Walkthrough of accounting controls over significant transaction cycles: •Purchasing and Accounts Payable •Payroll •Cash Receipts –taxes, municipal court, utility billing •Capital Projects •Budget •Test of internal controls: •Cash disbursements •Payroll •Test of compliance •Public Funds Investment Act •Bidding procedures 10 Interim fieldwork and risk assessment were performed in August 2017. Procedures included: Audit Process •Testing of significant account balances using a combination of vouching of material transactions, sampling transactions and applying analytical procedures. •Assisting with the preparation of the financial statements. 11 Final fieldwork-performed in January 2018 Procedures included: 12 Auditor Communications for the year ended September 30. 2017 13 Required Communications to Those in Charge of Governance Communication Results Auditor’s responsibility under generally accepted auditing standards (GAAS) The financial statements are the responsibility of the Town. Our audit was designed in accordance with GAAS in the U.S. and provide for reasonable rather than absolute assurance that the financial statements are free of material misstatement. Our responsibility is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented , in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. The audit of the fiscal year 2017 financial statements has been completed and we have issued an unmodified opinion. 14 Required Communications to Those in Charge of Governance Communication Results Auditor’s Responsibility under Government Auditing Standards In addition to the GAAS responsibilities, we are required to issue a written report on our consideration of internal controls and identify significant deficiencies, including material weaknesses, if any. Our report does not provide assurance on internal controls. We design our audit to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contracts or grant agreements that have a direct or material effect on the financial statements. We have issued a written report on the results of these procedures; however, our report does not express an opinion on compliance. No findings noted. 15 Required Communications to Those in Charge of Governance Communication Results Unusual transactions and the adoption of new accounting principles The significant accounting policies used by the Town are described in Note 1 to the basic financial statements. New GASB pronouncements implemented in 2017 include GASB Statement No. 77,“Tax Abatement Disclosures” which requires certain information to be disclosed related to tax abatements. We noted no transactions entered into by the Town during the year for which there is a lack of authoritative guidance or consensus. 16 Required Communications to Those in Charge of Governance Communication Results Fraud and illegal acts No fraud, irregularities, or illegal acts were noted. Material weakness in internal control No material weaknesses noted. Other information contained in documents containing audited financial statements We performed limited procedures on the Management’s Discussion and Analysis (MD&A) and Required Supplementary Information (RSI). We did not provide any assurance on this information. Management judgments and accounting estimates Management’s estimates of state foundation revenue, uncollectible receivables, net pension liability, and useful lives of capital assets were evaluated and determined to be reasonable in relation to the financial statements as a whole. Management representations We requested certain representations from management that were included in the management representation letter. 17 Required Communications to Those in Charge of Governance Communication Results Difficulties encountered No significant difficulties were encountered during our audit. Management consultations We are not aware of management consulting with other accountants for a second opinion. Auditor independence No independence issues noted. 18 Required Communications to Those in Charge of Governance Communication Results Audit adjustments Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. During the current year, there were no material adjustments posted as a result of our audit procedures. There was one adjustment that management deemed immaterial and, therefore, has not been reflected in the Town’s financial statements. The adjustment reduces prepaid items and increases debt service expenditures in the Westlake Academy Fund for a $162,005 lease payment made in advance of its due date. Other material written communications between Weaver and Tidwell, L.L.P., and the Town Nothing to note. 19 Auditor Results Auditor Results •We have issued the Independent Auditor’s Report on the financial statements –Unmodified opinion •We have issued the Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards –No findings noted. 20 21 Financial Highlights 22 Financial Highlights Comparison of Governmental Funds Expenditures by Fund (in millions of dollars) $6.8 $9.2 $2.0 $0.3 $- $9.3 $0.9 FY 2016 General Fund Westlake Academy Debt Service Fund Capital Projects Funds Westlake Academy ExpansionSolana PID Capital ProjectsNonmajor Governmental Funds Governmental Funds Expenditures for FY 2017 totaled $27.6 million, an $846K or 3% decrease. This decrease is primarily attributable to the net effect of a $2.6 million decrease in capital outlay and a $1.3 million increase in general government expenditures, the majority of which is due to the relocation of the Town Hall. $8.3 $8.8 $2.3 $2.1 $-$5.2 $0.9 FY 2017 General Fund Westlake Academy Debt Service Fund Capital Projects Funds Westlake Academy Expansion Solana PID Capital Projects Nonmajor Governmental Funds 23 Financial Highlights Comparison of Governmental Funds Expenditures $4.6 $2.7 $0.2 $0.8 $0.2 $0.7 $8.8 $7.0 $2.6 $3.3 $2.5 $0.2 $0.8 $0.1 $0.7 $9.2 $9.6 $2.1 $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 2017 2016 (2 -year comparison –current year and prior year –in millions) 24 Financial Highlights Comparison of Governmental Revenues by Source Governmental Revenues for FY 2017 totaled $22.6 million, a $2.7 million or 14% increase. This increase is primarily due to a $1.4 million increase in contributions and $0.8 million increase in building permits and fees in the current year. 20.8% 7.1% 7.1% 29.2% 7.5% 15.5% 12.8% FY 2017 Revenues Sales taxes Property taxes Other taxes State program revenue Contributions Building permits and fees Other 23.1% 7.5% 9.0% 32.7% 1.5% 13.6% 12.6% FY 2016 Revenues Sales taxes Property taxes Other taxes State program revenue Contributions Building permits and fees Other revenues 25 Financial Highlights Comparison of Governmental Revenues by Source (2 -year comparison –current year and prior year –in millions) $4.7 $1.6 $1.6 $6.6 $1.7 $3.5 $2.9 $4.6 $1.5 $1.8 $6.5 $0.3 $2.7 $2.5 $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 Sales taxes Property taxes Other taxes State program revenue Contributions Building permits and fees Other 2017 2016 26 Financial Highlights Fund Balances Governmental Funds’ Fund Balances As of September 30, 2017, the Town’s governmental funds reported a combined ending fund balance of $27.8 million as follows: •General Fund $10,937,492 •Westlake Academy 965,248 •Debt Service 11,963 •Capital Projects 12,869,877 •Solana PID CPF 797,234 •Other Funds 2,226,304 $27,808,118 Overall, fund balance of the Governmental Funds increased by $7.4 million. General Fund fund balance increased $1,258,019 during FY17. Unassigned fund balance ($10,363,702) represents 125% of fiscal year 2017 General Fund expenditures. 39.3% 3.5%0.0% 46.3% 2.9% 8.0%General Fund Westlake Academy Debt Service Capital Projects Solana PID Capital Project Other Funds 27 Financial Highlights Budgetary Highlights –General Fund The Town had a favorable budget variance of $1.1 million(net change in fund balance): •Actual revenues were $604K more than budgeted. •Building permits and fees were $716K more than budgeted. •Sales taxes were $43k more than budgeted. •Miscellaneous revenue was $105k more than budgeted. •Actual expenditures were below budget by $403k due to cost savings realized in all areas. 28 Financial Highlights Comparison of Proprietary Funds Operating Revenue and Expenses –FY 2017 and FY 2016 (in millions) $4.8 $4.0 $4.0 $4.7 $3.6 $3.8 $4.0 $4.2 $4.4 $4.6 $4.8 $5.0 Operating Revenues Operating Expenses 2017 2016 Proprietary funds net position decreased by $166K during fiscal year 2017. Operating revenues increased $846K due primarily to an increase in charges for services. Operating expenses decreased $684K from the previous year. 29 Financial Highlights Proprietary Funds Operating Expenses-(in thousands) The $684K decrease in operating expenses is primarily the net result of: •$1.1 million payment to City of Ft. Worth for the Town’s proportionate share of water system upgrades in the prior year. •$483K increase in other expenses, the result of a settle-up with City of Southlake related to wastewater treatment in the current year. $498 $95 $496 $31 $1,216 $1,687 $423 $1,193 $497 $32 $1,358 $1,204 $- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 Payroll costs Professional services Depreciation Amortization of WW Rights Water Purchases Other 2017 2016 30 Standards Required to be Implemented in FY2018 Effective for the year ended September 30, 2018 GASB 75 –Accounting and Financial Reporting for Postemployment Benefits Other Than Pension (OPEB) •Objective: to improve accounting and financial reporting by state and local governments for OPEB. GASB 86 –Certain Debt Extinguishment Issues •Objective: to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary asset acquired with only existing resources –resources other than the proceeds of refunding debt –are placed in an irrevocable trust for the sole purpose of extinguishing debt. 31 We appreciate the opportunity to work with Town of Westlake and look forward to our continued relationship. Questions? John DeBurro, CPA | Partner 972.448.6970 | john.deburro@weaver.com